Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 03, 2018 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
Entity Registrant Name | Energy XXI Gulf Coast, Inc. | |
Entity Central Index Key | 1,404,973 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 33,396,563 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash and cash equivalents | $ 97,900 | $ 151,729 |
Accounts receivable | ||
Oil and natural gas sales | 55,413 | 55,598 |
Joint interest billings, net | 4,004 | 6,336 |
Other | 19,920 | 15,726 |
Prepaid expenses and other current assets | 11,873 | 21,602 |
Restricted cash | 6,432 | 6,392 |
Total Current Assets | 195,542 | 257,383 |
Property and Equipment | ||
Oil and natural gas properties, net - full cost method of accounting, including $192.3 million and $200.2 million of unevaluated properties not being amortized at June 30, 2018 and December 31, 2017, respectively | 773,153 | 764,922 |
Other property and equipment, net | 8,269 | 10,120 |
Total Property and Equipment, net of accumulated depreciation, depletion, amortization and impairment | 781,422 | 775,042 |
Other Assets | ||
Restricted cash | 25,814 | 25,712 |
Other assets | 29,468 | 18,845 |
Total Other Assets | 55,282 | 44,557 |
Total Assets | 1,032,246 | 1,076,982 |
Current Liabilities | ||
Accounts payable | 79,154 | 85,122 |
Accrued liabilities | 52,111 | 45,494 |
Asset retirement obligations | 55,952 | 51,398 |
Derivative financial instruments | 36,793 | 32,567 |
Current maturities of long-term debt | 17 | 21 |
Total Current Liabilities | 224,027 | 214,602 |
Long-term debt, less current maturities | 58,413 | 73,952 |
Asset retirement obligations | 625,496 | 613,453 |
Derivative financial instruments | 6,305 | |
Other liabilities | 14,932 | 10,783 |
Total Liabilities | 929,173 | 912,790 |
Commitments and Contingencies (Note 13) | ||
Stockholders' Equity | ||
Preferred stock, $0.01 par value, 10,000,000 shares authorized and no shares outstanding at June 30, 2018 and December 31, 2017 | ||
Common stock, $0.01 par value, 100,000,000 shares authorized and 33,396,563 and 33,254,963 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively | 334 | 333 |
Additional paid-in capital | 916,525 | 911,144 |
Accumulated deficit | (813,786) | (747,285) |
Total Stockholders' Equity | 103,073 | 164,192 |
Total Liabilities and Stockholders' Equity | $ 1,032,246 | $ 1,076,982 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Oil and natural gas properties, net - full cost method of accounting, unevaluated properties not being amortized | $ 192.3 | $ 200.2 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 33,396,563 | 33,254,963 |
Common stock, shares outstanding | 33,396,563 | 33,254,963 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Revenues | ||||
Gain (loss) on derivative financial instruments | $ (26,045) | $ 9,412 | $ (38,879) | $ 13,110 |
Total Revenues | 116,739 | 144,019 | 238,910 | 302,105 |
Costs and Expenses | ||||
Lease operating | 79,296 | 83,655 | 161,318 | 160,922 |
Production taxes | 371 | 482 | 1,577 | 721 |
Gathering and transportation | 3,119 | 2,678 | 7,175 | 13,900 |
Pipeline facility fee | 10,494 | 10,494 | 20,988 | 20,988 |
Depreciation, depletion and amortization | 27,555 | 38,685 | 54,966 | 80,581 |
Accretion of asset retirement obligations | 11,197 | 9,984 | 22,315 | 23,065 |
Impairment of oil and natural gas properties | 40,774 | |||
General and administrative expense | 15,568 | 20,716 | 30,700 | 42,320 |
Reorganization items | 113 | 349 | 2,244 | |
Total Costs and Expenses | 147,713 | 166,694 | 299,388 | 385,515 |
Operating Loss | (30,974) | (22,675) | (60,478) | (83,410) |
Other Income (Expense) | ||||
Other income, net | 191 | 80 | 334 | 102 |
Interest expense | (3,252) | (3,642) | (6,946) | (7,476) |
Total Other Expense, net | (3,061) | (3,562) | (6,612) | (7,374) |
Loss Before Income Taxes | (34,035) | (26,237) | (67,090) | (90,784) |
Net Loss | $ (34,035) | $ (26,237) | $ (67,090) | $ (90,784) |
Net Loss per Share | ||||
Basic and Diluted (in dollars per share) | $ (1.02) | $ (0.79) | $ (2.01) | $ (2.73) |
Weighted Average Number of Common Shares Outstanding | ||||
Basic and Diluted (in shares) | 33,427 | 33,237 | 33,367 | 33,234 |
Oil sales | ||||
Revenues | ||||
Revenues | $ 133,180 | $ 118,484 | $ 256,968 | $ 252,277 |
Natural gas liquids sales | ||||
Revenues | ||||
Revenues | 1,076 | 2,370 | 2,419 | 4,597 |
Natural gas sales | ||||
Revenues | ||||
Revenues | 6,261 | $ 13,753 | 14,643 | $ 32,121 |
Other revenue | ||||
Revenues | ||||
Revenues | $ 2,267 | $ 3,759 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash Flows From Operating Activities | ||
Net loss | $ (67,090) | $ (90,784) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
Depreciation, depletion and amortization | 54,966 | 80,581 |
Impairment of oil and natural gas properties | 40,774 | |
Change in fair value of derivative financial instruments | 10,531 | (10,470) |
Accretion of asset retirement obligations | 22,315 | 23,065 |
Amortization of debt issuance costs | 11 | 6 |
Deferred rent | 4,169 | 4,031 |
Provision for loss on accounts receivable | 300 | |
Stock-based compensation | 5,617 | 3,722 |
Changes in operating assets and liabilities | ||
Accounts receivable | (1,677) | 27,404 |
Prepaid expenses and other assets | (1,208) | 11,134 |
Settlement of asset retirement obligations | (34,717) | (27,491) |
Accounts payable, accrued liabilities and other | 853 | (50,738) |
Net Cash Provided by (Used in) Operating Activities | (6,230) | 11,534 |
Cash Flows from Investing Activities | ||
Capital expenditures | (31,954) | (24,496) |
Insurance payments received | 41 | |
Proceeds from the sale of other property and equipment | 288 | 1,279 |
Net Cash Used in Investing Activities | (31,666) | (23,176) |
Cash Flows from Financing Activities | ||
Payments on long-term debt | (15,556) | (728) |
Other | (235) | (61) |
Net Cash Used in Financing Activities | (15,791) | (789) |
Net Decrease in Cash, Cash Equivalents and Restricted Cash | (53,687) | (12,431) |
Cash, Cash Equivalents and Restricted Cash, beginning of period | 183,833 | 223,288 |
Cash, Cash Equivalents and Restricted Cash, end of period | $ 130,146 | $ 210,857 |
Organization and Nature of Oper
Organization and Nature of Operations | 6 Months Ended |
Jun. 30, 2018 | |
Organization and Nature of Operations | |
Organization and Nature of Operations | Note 1 — Organization and Nature of Operations Energy XXI Gulf Coast, Inc. (“EGC” or the “Company”) was formed in December 2016 after emerging from a voluntary reorganization under chapter 11 proceedings as the restructured successor of Energy XXI Ltd (“EXXI Ltd” or the “Predecessor”). The Company is headquartered in Houston, Texas, and engages in the development, exploitation, and operation of oil and natural gas properties primarily offshore in the GoM Shelf, which is an area in less than 1,000 feet of water, and also onshore in Louisiana and Texas. EGC owns and operates nine of the largest GoM Shelf oil fields ranked by total cumulative oil production to date and utilizes various techniques to increase the recovery factor and thus increase the total oil recovered. |
Recent Events
Recent Events | 6 Months Ended |
Jun. 30, 2018 | |
Recent Events | |
Recent Events | Note 2 — Recent Events On June 18, 2018, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MLCJR LLC (“Cox”), a Texas limited liability company and an affiliate of Cox Oil LLC, and YHIMONE, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Cox (“Merger Sub”). Upon the terms and conditions set forth in the Merger Agreement, at the consummation of the transactions contemplated by the Merger Agreement, Merger Sub will be merged with and into EGC (the “Merger”), and EGC will survive the Merger as the surviving corporation and an indirect wholly-owned subsidiary of Cox. Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of EGC common stock, par value $0.01 per share (“Common Stock”), will be converted into the right to receive $9.10 in cash without interest (the “Merger Consideration”). Pursuant to the Merger Agreement, immediately prior to the Effective Time, the vesting of each outstanding EGC restricted stock unit (each, an “RSU”) will accelerate (if not already vested), with any performance conditions deemed achieved at target, and be cancelled and converted into the right to receive the Merger Consideration, multiplied by the number of shares of Common Stock subject to that RSU. The exercise price for each outstanding stock option is greater than the Merger Consideration. As a result, at the Effective Time, each stock option to purchase shares of Common Stock will be cancelled for no consideration. In accordance with the warrant agreement under which the Company’s 2,119,889 outstanding warrants were issued, the warrants will no longer represent the right to acquire shares of Common Stock at the Effective Time. Instead, at that time, each warrant will become exercisable for $9.10 in cash, but the warrant holder would be required to pay the warrant’s cash exercise price of $43.66 per share in order to receive $9.10. Therefore, the Merger Agreement provides that, at the Effective Time, each outstanding warrant will be cancelled for no consideration. The completion of the Merger is subject to satisfaction or waiver of certain closing conditions, including: (i) approval of the Merger Agreement by EGC’s stockholders, (ii) there being no law or injunction prohibiting consummation of the Merger; (iii) subject to specified materiality standards, the accuracy of the representations and warranties of the other party; (iv) compliance by the other party in all material respects with its covenants; and (v) the absence of a material adverse effect on the other party. The completion of the Merger is not conditioned on receipt of financing by Cox. EGC and Cox have made customary representations and warranties in the Merger Agreement. The Merger Agreement also contains customary covenants and agreements whereby EGC has agreed to (i) operate its business in the ordinary course; (ii) use its commercially reasonable efforts to maintain and preserve its present business organization, retain its officers and key employees, and preserve its relationships with its customers and suppliers; and (iii) subject to certain exceptions, not take certain actions relating to its dividends, capital stock or alternative business combinations, among other things, during the period between the execution of the Merger Agreement and the Effective Time. EGC and Cox have each agreed to use commercially reasonable efforts to cause the Merger to be completed. The Merger Agreement contains certain termination rights for both EGC and Cox and further provides that, upon termination of the Merger Agreement, under certain circumstances, EGC may be required to pay Cox a termination fee equal to $8 million and, in certain other circumstances, EGC may be required to reimburse Cox for its documented out-of-pocket expenses up to $2 million. As stated in the Merger Proxy Statement, EGC will hold a special meeting of its stockholders on September 6, 2018 at 9 a.m. (Houston time). At that special meeting, EGC stockholders will be asked to vote on the adoption of the Merger Agreement, which requires the affirmative vote of the holders of two-thirds of the issued and outstanding shares of Common Stock entitled to vote at the EGC special meeting. The record date for the special meeting is August 3, 2018. Therefore, in order to be entitled to notice of, and to vote at, the special meeting or any adjournment or postponement of the special meeting, an individual or entity must be the record holder of shares of Common Stock at the close of business on August 3, 2018. The Merger is expected to close in the third quarter of 2018. However, EGC cannot provide any assurance the combination will be completed on the terms or timeline currently contemplated, or at all. The above is a summary of the material terms of the Merger Agreement and is qualified in its entirety by the terms and conditions of the Merger Agreement, which was filed as an exhibit to the Company’s current report on Form 8-K filed on June 18, 2018. Shortly prior to entering into the Merger Agreement, the Company terminated its previously-disclosed non-binding term sheet with Orinoco Natural Resources, LLC and certain of its affiliates, which provided for the disposition of certain non-core assets, a cash payment, execution of a ten-year second lien note, issuance of common equity, execution of a ten-year master services agreement and a commitment to anchor a potential future financing plan. The termination fee for the term sheet was $1.0 million and was paid subsequent to June 30, 2018. |
Summary of Significant Accounti
Summary of Significant Accounting Policies and Recent Accounting Pronouncements | 6 Months Ended |
Jun. 30, 2018 | |
Summary of Significant Accounting Policies and Recent Accounting Pronouncements | |
Summary of Significant Accounting Policies and Recent Accounting Pronouncements | Note 3 – Summary of Significant Accounting Policies and Recent Accounting Pronouncements Principles of Consolidation and Reporting. The accompanying consolidated financial statements on June 30, 2018 include the accounts of EGC and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). All intercompany accounts and transactions are eliminated in consolidation. EGC’s interests in oil and natural gas exploration and production ventures and partnerships are proportionately consolidated. The consolidated financial statements for the prior period include certain reclassifications to conform to the current presentation. Those reclassifications did not have any impact on the previously reported consolidated result of operations or cash flows. Use of Estimates. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates of proved reserves are key components of the Company’s depletion rate for its proved oil and natural gas properties and the full cost ceiling test limitation. Other items subject to estimates and assumptions include fair value estimates used in fresh start accounting; accounting for acquisitions and dispositions; carrying amounts of property, plant and equipment; asset retirement obligations; deferred income taxes; valuation of derivative financial instruments; among others. Accordingly, the Company’s accounting estimates require the exercise of judgment by management in preparing such estimates. While the Company believes that the estimates and assumptions used in preparation of our consolidated financial statements are appropriate, actual results could differ from those estimates, and any such differences may be material. Interim Financial Statements. The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal and recurring nature considered necessary for a fair presentation have been included in the accompanying consolidated financial statements. The results of operations for the interim period are not necessarily indicative of the results that will be realized for the entire fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 2017 Annual Report. Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014‑09, Revenue from Contracts with Customers (“ASU 2014‑09”), as a new Accounting Standards Codification (ASC) Topic, ASC 606. ASU 2014‑09 is effective for the Company beginning in the first quarter of 2018. In May 2016, the FASB issued ASU 2016-11, which rescinds certain SEC guidance in the related ASC, including guidance related to the use of the “entitlements” method of revenue recognition used by the Company. The Company adopted ASC 606 effective January 1, 2018, which replaces previous revenue recognition requirements under FASB ASC Topic 605 – Revenue Recognition (“ASC 605”). The standard was adopted using the modified retrospective approach which requires the Company to recognize in retained earnings at the date of adoption the cumulative effect of the application of ASC 606 to all existing revenue contracts which were not substantially complete as of January 1, 2018. T he Company has elected the contract modification practical expedient which allows the Company to reflect the aggregate effect of all modifications prior to the date of adoption when applying ASC 606. Although the adoption of ASC 606 did not have an impact on the Company’s net loss or cash flows, it did result in the reclassification of certain fees received under pipeline gathering and transportation and pipeline tariff agreements that were previously included in oil sales to other revenue i n the consolidated statements of operations. The Company has determined that its contracts for the sale of crude oil, unprocessed natural gas and NGLs contain monthly performance obligations to deliver product at locations specified in the contract. Control is transferred at the delivery location, at which point the performance obligation has been satisfied and revenue is recognized. Fees included in the contract that are incurred prior to control transfer are classified as lease operating expense and fees incurred after control transfers are included as a reduction to the transaction price. The transaction price at which revenue is recognized consists entirely of variable consideration based on quoted market prices less various fees and the quantity of volumes delivered. The Company receives payment for product sales from one to three months after delivery. At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are accrued in accounts receivable, oil and natural gas sales in the consolidated balance sheets. Variances between the Company’s estimated revenue and actual payments are recorded in the month the payment is received, however, differences have been and are insignificant. The Company has elected to utilize the practical expedient in ASC 606 that states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under our contracts, each monthly delivery of product represents a separate performance obligation, therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. The Company previously utilized the entitlements method to account for natural gas imbalances, which is no longer applicable under ASC 606. The impact to the financial statements resulting from this change in accounting for natural gas imbalances was not significant. In February 2016, the FASB issued ASU No. 2016‑02, Leases ( “ ASU 2016‑02”), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective, the FASB amended the FASB Accounting Standards Codification and created Topic 842, Leases . The guidance in this ASU supersedes Topic 840, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In the normal course of business, the Company enters into lease agreements to support operations. The Company is evaluating the provisions of ASU 2016‑02 to determine the quantitative effects it will have on its consolidated financial statements and related disclosures. The Company believes the adoption and implementation of this ASU will have a material impact on its balance sheet resulting from an increase in both assets and liabilities relating to its leasing activities. In June 2016, the FASB issued ASU No. 2016‑13, Credit Losses, Measurement of Credit Losses on Financial Instruments (“ASU 2016‑13”). ASU 2016‑13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today’s incurred loss approach with an expected loss model for instruments measured at amortized cost. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. The Company has not yet determined the effect of this standard on its consolidated financial position, results of operations or cash flows. In August 2016, the FASB issued ASU No. 2016‑15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016‑15”). ASU 2016‑15 provides guidance on eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The Company’s adoption of ASU 2016‑15 on January 1, 2018 using the retrospective transition method had no effect on its consolidated financial position, results of operations or cash flows other than presentation. In November 2016, the FASB issued ASU No. 2016‑18 , Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016‑18). ASU 2016‑18 requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The Company’s adoption of ASU 2016‑18 on January 1, 2018 had no effect on its consolidated financial position, results of operations or cash flows other than presentation. |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2018 | |
Property and Equipment | |
Property and Equipment | Note 4 – Property and Equipment Property and equipment consists of the following ( in thousands ): As of June 30, As of December 31, 2018 2017 Oil and natural gas properties - full cost method of accounting Proved properties $ 1,372,463 $ 1,307,009 Less: accumulated depreciation, depletion, amortization and impairment (791,585) (742,286) Proved properties, net 580,878 564,723 Unevaluated properties 192,275 200,199 Oil and natural gas properties, net 773,153 764,922 Other property and equipment 13,936 13,780 Less: accumulated depreciation and impairment (5,667) (3,660) Other property and equipment, net 8,269 10,120 Total property and equipment, net of accumulated depreciation, depletion, amortization and impairment $ 781,422 $ 775,042 Under the full cost method of accounting, at the end of each financial reporting period, the Company compares the present value of estimated future net cash flows from proved reserves (computed using the unweighted arithmetic average of the first-day-of-the-month historical price, net of applicable differentials, for each month within the previous 12‑month period discounted at 10%, plus the lower of cost or fair market value of unevaluated properties and excluding cash flows related to estimated abandonment costs associated with developed properties) to the net capitalized costs of oil and natural gas properties, net of related deferred income taxes. The Company refers to this comparison as a “ceiling test.” If the net capitalized costs of these oil and natural gas properties exceed the estimated discounted future net cash flows, the Company is required to write down the value of oil and natural gas properties to the amount of the discounted cash flows. For the six months ended June 30, 2018, the Company did not incur any impairment to its oil and natural gas properties. For the three months ended June 30, 2018, the Company did not record an impairment to oil and natural gas properties. For the six months ended June 30, 2017, the Company recorded impairment to oil and natural gas properties of $40.8 million. The impairment to oil and natural gas properties for the six months ended June 30, 2017 was primarily due to the difference in SEC reserves and the related PV-10 value relative to the estimated reserves prepared by its internal reservoir engineers as of December 31, 2016. Costs associated with unevaluated properties are transferred to evaluated properties either (i) ratably over a period of the related field’s life, or (ii) upon determination as to whether there are any proved reserves related to the unevaluated properties or the costs are impaired or capital costs associated with the development of these properties will not be available. For the three months and six months ended June 30, 2018, the costs associated with unevaluated properties decreased by $3.6 million and $7.9 million, respectively. For the three months ended June 30, 2018, the decrease of $2.2 million was attributable to ratable amortization and $1.8 million was transferred to evaluated properties due to impairment, partially offset by an addition of $0.4 million related to exploratory drilling costs. For the six months ended June 30, 2018, the decrease of $ 4.3 million was attributable to ratable amortization and $4.0 million was transferred to evaluated properties due to impairment, partially offset by an addition of $0.4 million related to exploratory drilling costs. |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 30, 2018 | |
Long-Term Debt | |
Long-Term Debt | Note 5 – Long-Term Debt As of June 30, 2018 and December 31, 2017 the Company’s outstanding debt consisted of the following ( in thousands ): As of June 30, 2018 As of December 31, 2017 Exit Facility $ 58,447 $ 73,996 Capital lease obligations 17 21 Total debt 58,464 74,017 Less: debt issue costs 34 44 Less: current maturities 17 21 Total long-term debt $ 58,413 $ 73,952 Exit Facility On December 30, 2016, the Company entered into a secured Exit Facility, which matures on December 30, 2019. The Exit Facility, as amended, is secured by mortgages on at least 90% of the value of it and its subsidiary guarantors’ proved developed producing reserves as well as its total proved reserves. The Exit Facility consists of two facilities: (i) a term loan facility (the “Exit Term Loan”) and (ii) a revolving credit facility (the “Exit Revolving Facility”) for the making of revolving loans and the issuance of letters of credit. The Exit Facility is guaranteed by substantially all of the wholly-owned subsidiaries of the Company, subject to customary exceptions, and is secured by first priority security interests on substantially all assets of each guarantor. Under the Exit Facility, the borrower will not declare or make a restricted payment, or make any deposit for any restricted payment. Restricted payments include declaration or payment of dividends. The Company must make a mandatory prepayment of the revolving loans and, if necessary, cash collateralize the outstanding letters of credit if a reduction in the revolving credit capacity would cause the revolving credit exposure to exceed the revolving credit capacity. On or after the determination of the borrowing base, the Company must also make a mandatory prepayment of the revolving loans and, if necessary, cash collateralize the outstanding letters of credit not in favor of ExxonMobil if a borrowing base deficiency arises. The Exit Facility contains covenants and events of default customary for reserve-based lending facilities. In addition, for each fiscal quarter ending on and after March 31, 2018, the Company must maintain a Current Ratio (as defined in the Exit Facility) of no less than 1.00 to 1.00 and a First Lien Leverage Ratio (as defined in the Exit Facility) of no greater than 4.00 to 1.00 calculated on a trailing four quarter basis. On March 29, 2018, the Company prepaid $10.0 million outstanding under the Exit Term Loan. No payment was made during the quarter ended June 30, 2018. Due to a potential decline in its estimated trailing twelve-month EBITDA calculation for the twelve-month period ending September 30, 2018, the Company may prepay additional amounts of its outstanding Exit Term Loan in order to prevent a breach of the First Lien Leverage Ratio, and such a prepayment could adversely affect its liquidity. Additionally, due to its decreased cash position, the Company may not meet its required Current Ratio (as defined in the Exit Facility). Under those circumstances, the Company would explore several options to remain in compliance with the terms of the Exit Facility, including modifying the timing of its capital expenditures. Furthermore, for each fiscal quarter ending on and after March 31, 2018, if the Asset Coverage Ratio (as defined in the Exit Facility) is less than 1.50 to 1.00, the Company must make a mandatory prepayment of the Exit Term Loan in an amount equal to the lesser of (i) 7.5% of the aggregate outstanding principal amount of the Exit Term Loan on December 30, 2016 and (ii) the then outstanding principal amount of the Exit Term Loan. Based on the results of the quarter ended March 31, 2018, the Company made a mandatory prepayment of $5.5 million during the quarter ended June 30, 2018. Based on the results of the quarter ended June 30, 2018, the Company will not be required to make a prepayment during the quarter ended September 30, 2018. Based upon the Company’s current expectations with respect to its capital resources, capital expenditures, results from operations and commodity prices, the Company believes that it is possible that it will be required to make a mandatory prepayment with respect to fiscal quarters subsequent to September 30, 2018. In the event of a mandatory prepayment, any such mandatory prepayment would not, in and of itself, constitute a default under the Exit Facility. As of June 30, 2018, the Company is in compliance with all terms of the Exit Facility. Unused credit capacity under the Exit Revolving Facility will accrue a commitment fee of 0.50% payable quarterly in arrears. Interest on the outstanding amount of the Exit Term Loan, at the Company’s option, will accrue at an interest rate equal to either: (i) the Alternative Base Rate (as defined in the Exit Facility) plus 3.5% per annum or (ii) the one-month LIBO Rate (as defined in the Exit Facility) plus 4.5% per annum. Interest on the Exit Term Loan bearing interest at the Alternative Base Rate will be payable quarterly; interest on the Exit Term Loan bearing interest at the LIBO Rate will be payable monthly. Interest on the outstanding amount of revolving loans borrowed under the Exit Revolving Facility, at the Company’s option, will accrue at an interest rate equal to either (i) the Alternative Base Rate plus 3.5% per annum or (ii) the one, three or six month LIBO Rate plus 4.5% per annum. Interest on revolving loans that bear interest at the Alternative Base Rate will be payable quarterly; interest on revolving loans that bear interest at the LIBO Rate will be payable at the end of each interest period or, if an interest period exceeds three months, at the end of every three months. The stated amount of each letter of credit issued under the Exit Revolving Facility accrues fees at the rate of 4.5% per annum. There is an issuance fee of 0.25% per annum charged on the stated amount of each letter of credit issued after December 30, 2016. The Company currently has $12.5 million available for borrowing, under specific circumstances, as revolving loans subject to a maximum for all such loans of (i) $25 million prior to the date the borrowing base is initially determined and (ii) the borrowing base, on and after the date the borrowing base is initially determined. The borrowing base will be initially determined at a date elected by the Company, and will be redetermined semi-annually thereafter. Currently, the Company has not elected a date for the initial borrowing base determination. As of June 30, 2018, the Company had approximately $58.4 million in borrowings and $20 1.5 million in letters of credit issued under the Exit Facility. |
Asset Retirement Obligations
Asset Retirement Obligations | 6 Months Ended |
Jun. 30, 2018 | |
Asset Retirement Obligations | |
Asset Retirement Obligations | Note 6 – Asset Retirement Obligations The following table describes the changes to the Company’s asset retirement obligations ( in thousands ): Balance as of December 31, 2017 $ 664,851 Liabilities incurred 8,761 Liabilities settled (34,717) Revisions 20,238 Accretion expense 22,315 Total balance as of June 30, 2018 681,448 Less: current portion 55,952 Long-term portion as of June 30, 2018 $ 625,496 |
Derivative Financial Instrument
Derivative Financial Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Financial Instruments | |
Derivative Financial Instruments | Note 7 – Derivative Financial Instruments The Company enters into derivative transactions to reduce exposure to fluctuations in the price of crude oil and natural gas with multiple investment-grade rated counterparties, primarily financial institutions, to reduce the concentration of exposure to any individual counterparty. The Company has historically used various instruments, including financially settled crude oil and natural gas puts, put spreads, swaps, costless collars and three-way collars in its derivative portfolio. With a costless collar, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is below the floor price of the collar, and the Company was required to make a payment to the counterparty if the settlement price for any settlement period is above the cap price for the collar. In a fixed price swap contract, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is below the swap fixed price, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is above the swap fixed price. Derivative financial instruments are recorded at fair value and included as either assets or liabilities in the accompanying consolidated balance sheets. Any gains or losses resulting from changes in fair value of our outstanding derivative financial instruments and from the settlement of derivative financial instruments are recognized in earnings and included in (loss) gain on derivative financial instruments as a component of revenues in the accompanying consolidated statements of operations. Most of the Company’s crude oil production is sold at Heavy Louisiana Sweet. The Company has historically included contracts indexed to NYMEX-WTI, ICE Brent futures and Argus-LLS futures in its derivative portfolio to closely align and manage its exposure to the associated price risk. The energy markets have historically been very volatile, and there can be no assurances that crude oil and natural gas prices will not be subject to wide fluctuations in the future. While the use of derivative arrangements helps to limit the downside risk of adverse price movements, they may also limit future gains from favorable price movements. As of June 30, 2018, the Company had the following open crude oil derivative positions: Weighted Average Type of Volumes Contract Price Remaining Contract Term Contract Index (MBbls) Swaps July 2018 - December 2018 Swaps NYMEX-WTI $ 50.68 January 2019 - December 2019 Swaps ICE Brent $ 61.00 In April 2018, with no cash outlay, we unwound 3,000 BPD of our WTI swaps for the period from April 1, 2018 to June 30, 2018 and replaced the unwound swaps with 3,000 BPD ICE Brent swaps with an average swap price of $61.00 per Bbl for the period January 2019 to December 2019. Additionally, we added 3,000 BPD ICE Brent costless collars with a floor price of $60.00 and a ceiling price of $82.00 for the period April 13, 2018 to June 30, 2018. The fair values of derivative instruments in the Company’s consolidated balance sheets were as follows ( in thousands ): Asset Derivative Instruments Liability Derivative Instruments As of June 30, 2018 As of December 31, 2017 As of June 30, 2018 As of December 31, 2017 Balance Fair Value Balance Fair Value Balance Fair Value Balance Fair Value Derivative financial instruments Current $ - Current $ - Current $ 36,793 Current $ 32,567 Non- - Non- - Non- 6,305 Non- - Total gross derivative financial instruments subject to enforceable master netting agreement - - 43,098 32,567 Derivative financial instruments Current - Current - Current - Current - Non- - Non- - Non- - Non- - Gross amounts offset in Balance Sheets - - - - Net amounts presented in Balance Sheets Current - Current - Current 36,793 Current 32,567 Non- - Non- - Non- 6,305 Non- - $ - $ - $ 43,098 $ 32,567 The following table presents information about the components of the (loss) gain on derivative financial instruments ( in thousands ). Three Months Ended June 30, Six Months Ended June 30, (Loss) gain on derivative financial instruments 2018 2017 2018 2017 Cash settlements $ (15,301) $ 2,351 $ (28,348) $ 2,640 Non-cash gain in fair value (10,744) 7,061 (10,531) 10,470 Total (loss) gain on derivative financial instruments $ (26,045) $ 9,412 $ (38,879) $ 13,110 The Company monitors the creditworthiness of its counterparties who are also a part of its bank lending group. However, the Company is not able to predict sudden changes in counterparties’ creditworthiness. In addition, even if such changes are not sudden, the Company may be limited in our ability to mitigate an increase in counterparty credit risk. Possible actions would be to transfer its position to another counterparty or request a voluntary termination of the derivative contracts resulting in a cash settlement. Should one of its financial counterparties not perform, the Company may not realize the benefit of some of its derivative instruments under lower commodity prices and could incur a loss. As of June 30, 2018, the Company had no collateral deposits with our counterparties. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Taxes | |
Income Taxes | Note 8 – Income Taxes No cash income taxes were paid during the three months and six months ended June 30, 2018, and, based upon current commodity pricing and planned development activity, no cash income taxes are expected to be paid or owed for the year ending December 31, 2018. The Company has estimated its effective income tax rate for the year to be zero, as the Company is forecasting a pre-tax loss at this time. The Company does not believe that its net deferred tax assets are realizable in the future on a more-likely-than-not basis at this time; as such, during the three months and six months ended June 30, 2018, the Company increased its valuation allowance by $5.9 million and $12.3 million, respectively, to reflect the tax effects of this loss. The $12.3 million valuation allowance increase for the six months ended June 30, 2018, when coupled with the $306.2 million valuation allowance at December 31, 2017, results in a valuation allowance of $318.6 million at June 30, 2018. The Company made no changes during the period to its deferred tax assets or valuation allowance related to the Tax Cuts and Jobs Act of 2017. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2018 | |
Stockholders' Equity | |
Stockholders' Equity | Note 9 – Stockholders’ Equity Under the Company’s certificate of incorporation, the total number of all shares of capital stock that it is authorized to issue is 110 million shares, consisting of 100 million shares of the Company’s common stock, par value $0.01 per share, and 10 million shares of preferred stock, par value $0.01 per share. During the three months and six months ended June 30, 2018, we issued 128,085 shares and 141,600 shares, respectively, of our common stock upon vesting of RSUs and as of June 30, 2018, we had 33,396,563 shares of common stock, 285,105 stock options and 2,119,889 warrants outstanding. |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 6 Months Ended |
Jun. 30, 2018 | |
Supplemental Cash Flow Information | |
Supplemental Cash Flow Information | Note 10 – Supplemental Cash Flow Information The following table presents supplemental cash flow information ( in thousands ): Six Months Ended June 30, 2018 2017 Cash paid for interest $ 4,626 $ 7,484 The following table presents non-cash investing and financing activities ( in thousands ): Six Months Ended June 30, June 30, June 30, 2018 2017 Changes in capital expenditures and accrued liabilities or accounts payable $ - $ (164) Changes in asset retirement obligations 28,999 (133,039) Changes in other property and equipment - (455) The following table presents the reconciliation of cash, cash equivalents and restricted cash as presented on the consolidated statement of cash flows (in thousands) : As of June 30, December 31, June 30, 2018 2017 2017 Cash and cash equivalents $ 97,900 $ 151,729 $ 178,855 Restricted cash, current 6,432 6,392 6,365 Restricted cash, long term 25,814 25,712 25,637 Total Cash, cash equivalents and restricted cash $ 130,146 $ 183,833 $ 210,857 |
Employee Benefit Plans
Employee Benefit Plans | 6 Months Ended |
Jun. 30, 2018 | |
Employee Benefit Plans | |
Employee Benefit Plans | Note 11 – Employee Benefit Plans Long Term Incentive Plans On December 30, 2016, the Company adopted the Energy XXI Gulf Coast, Inc. 2016 Long Term Incentive Plan (the “2016 LTIP”), which is a comprehensive equity-based award plan as part of the compensation for the Company’s officers, directors, employees and consultants (the “Service Providers”). The total number of shares of common stock reserved and available for delivery with respect to awards under the 2016 LTIP was 1,859,552 shares (or 5% of the total new equity). Awards under the 2016 LTIP are awarded to the Service Providers selected at the discretion of the compensation committee (the “Committee”) of the board of directors of the Company (the “Board”). However, under the terms of the Energy XXI Ltd’s chapter 11 plan of reorganization, 3% of the 5% total new equity on a fully diluted basis reserved under the 2016 LTIP had to be allocated by the Board no later than 120 days after December 30, 2016. As of April 29, 2017, the 3% of total new equity had been allocated by the Board. In order to retain key employees and attract new employees with the experience and skill sets that fit the Company’s culture and corporate strategy, the Board approved the Energy XXI Gulf Coast, Inc. 2018 Long Term Incentive Plan (the “2018 LTIP”) on April 11, 2018 and the Company’s stockholders approved the 2018 LTIP at the 2018 annual meeting of stockholders held on May 17, 2018. Upon approval, the number of shares of common stock available for awards under the 2018 LTIP were (i) 1,860,000 plus (ii) the number of shares remaining available for award under the 2016 LTIP on the date of the 2018 annual meeting. As of June 30, 2018, there were 1,317,083 shares remaining available for award under the 2018 LTIP. As a result of the adoption and stockholder approval of the 2018 LTIP, no additional equity awards or other long term incentive awards may be made under the 2016 LTIP. However, existing awards that were granted under the 2016 LTIP will continue to be subject to the provisions of the 2016 LTIP. The Compensation Committee generally administers the 2016 LTIP and the 2018 LTIP (together the “Company LTIPs”). The Compensation Committee determines the types of equity based awards (which may include stock option, stock appreciation rights, RSUs, bonus stock awards, performance-based restricted stock units (each a “PBRSU”), other stock based awards or cash awards) and the terms and conditions (including vesting and forfeiture restrictions) of such awards. Under the Company LTIPs, stock options have been and may be issued with an exercise price that is not less than the fair market value of our common stock on the date of grant and expire 10 years from the grant date. Stock options that have been granted to date generally vest ratably over a three-year period. The fair value of each stock option granted is estimated on the date of grant using a Black-Scholes-Merton option valuation model that uses assumptions related to expected term, expected volatility, risk free rate and dividend yield. As of June 30, 2018, there were 285,105 unvested stock options and $ 0.9 million in unrecognized compensation cost related to unvested stock options. The exercise price for each outstanding stock option is greater than the Merger Consideration. As a result, if the Merger is consummated, at the Effective Time, each stock option to purchase shares of Common Stock will be cancelled for no consideration. Under the Company LTIPs, RSUs have been and may be granted as approved by the Committee. To date, the RSUs granted by the Committee have a vesting date up to three years from the date of grant and each RSU represents a right to receive one share of our common stock. During the three months and six months ended June 30, 2018, the Committee granted 475,886 and 1,272,853 RSUs at a weighted average price of $6.92 and $ 6.42 per restricted stock unit, respectively. As of June 30, 2018, there were 1,580,223 unvested RSUs and $1 0.6 million in unrecognized compensation cost related to unvested RSUs. If the Merger is consummated, immediately prior to the Effective Time, the vesting of each outstanding RSU will accelerate (if not already vested), with any performance conditions deemed achieved at target, and be cancelled and converted into the right to receive the Merger Consideration, multiplied by the number of shares of Common Stock subject to that RSU. The RSUs described in this paragraph do not include performance-based restricted stock units, which are described in the section below titled “Performance-Based Restricted Stock Units.” Performance-Based Restricted Stock Units On June 7, 2018, the Committee granted 262,500 PBRSUs to certain executive officers. All of the PBRSUs awarded vest equally over a three-year period, but only if the employee is still employed by the Company at the end of each measurement period. In the event of a change in control during a measurement period, the performance for that period shall be deemed to have been achieved at target and the award shall vest based on the employee’s service through the end of the period. Based on the performance of the Common Stock compared to a peer group, the employee will vest in (i) a maximum award equal to 150% of the target opportunity for maximum performance level or (ii) 0% of the target opportunity for performance below the threshold level. The PBRSUs were issued under the 2018 LTIP. If the Merger is consummated, immediately prior to the Effective Time, the vesting of each outstanding PBRSU will accelerate, with any performance conditions deemed achieved at target, and be cancelled and converted into the right to receive the Merger Consideration, multiplied by the number of shares of Common Stock subject to that PBRSU. As of June 30, 2018, there were 262,500 unvested PBRSUs and $2.3 million in unrecognized compensation cost related to unvested PBRSUs. |
Loss per Share
Loss per Share | 6 Months Ended |
Jun. 30, 2018 | |
Loss per Share | |
Loss per Share | Note 12 — Loss per Share Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Except when the effect would be anti-dilutive, the diluted earnings per share calculation includes the impact of RSUs, stock options and other common stock equivalents. The following table sets forth the calculation of basic and diluted loss per share (“EPS”) ( in thousands, except per share data ): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Net loss $ (34,035) $ (26,237) $ (67,090) $ (90,784) Weighted average shares outstanding for basic EPS 33,427 33,237 33,367 33,234 Add dilutive securities - - - - Weighted average shares outstanding for diluted EPS 33,427 33,237 33,367 33,234 Loss per share Basic and Diluted $ (1.02) $ (0.79) $ (2.01) $ (2.73) The Company’s RSUs granted to the members of the Board which are vested but not yet issued are treated as outstanding for basic loss per share calculations since these shares are entitled to participate in dividends declared on common shares, if any, and undistributed earnings. As participating securities, the shares of restricted stock are included in the calculation of basic EPS using the two-class method. For the three months and six months ended June 30, 2018 and 2017, no net loss was allocated to the participating securities. The following table sets forth the components of common stock equivalents (as calculated under the treasury stock method in accordance with GAAP) that were excluded from the diluted average shares calculation due to their anti-dilutive effect: Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Warrants 11,393,213 1,447,992 12,508,419 1,238,023 Options 1,066,237 204,896 1,201,495 269,817 RSUs 33,584 79,509 310,788 23,584 PBRSUs 25,963 - 17,664 - 12,518,997 1,732,397 14,038,366 1,531,424 The dilutive effect of warrants, options, RSUs and PBRSUs is calculated using the treasury stock method, which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. Accordingly, these common stock equivalents do not represent the number of shares of Common Stock that would be issued upon exercise or settlement of the applicable warrant, option, RSU or PBRSU. The increase in potentially dilutive shares for the three months ended June 30, 2018 compared to the three months ended June 30, 2017 and the six months ended June 30, 2018 compared to the six months ended June 30, 2017 is due to the decrease in average stock price for the comparative periods. The Company’s average stock price for the three months ended June 30, 2018 and 2017 was $6.85 per share and $25.94 per share, respectively. The Company’s average stock price for the six months ended June 30, 2018 and 2017 was $6.33 per share and $27.56 per share, respectively. The exercise price for EGC’s outstanding warrants is $43.66 per share, and the weighted average exercise price for EGC’s outstanding stock options is $28.90 per share for the six month period ended June 30, 2018. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 13 — Commitments and Contingencies Litigation. The Company is involved in various legal proceedings and claims, which arise in the ordinary course of our business. The Company does not believe the ultimate resolution of any such actions will have a material effect on its consolidated financial position, results of operations or cash flows. Letters of Credit and Performance Bonds. As of June 30, 2018, the Company had approximately $3 28.9 million of performance bonds outstanding and $200.0 million in letters of credit issued to ExxonMobil relating to assets in the Gulf of Mexico. In April 2015, the Predecessor received letters from the BOEM stating that certain of its subsidiaries no longer qualified for waiver of certain supplemental bonding requirements for potential offshore decommissioning, plugging and abandonment liabilities. As of June 30, 2018, approximately $177.2 million of the Company’s performance bonds are lease and/or area bonds issued to the BOEM, to which the BOEM has access to ensure commitment to comply with the terms and conditions of those leases. As of June 30, 2018, the Company also maintained approximately $15 1.7 million in performance bonds issued to third party assignors including certain state regulatory bodies for eventual decommissioning of certain wells and facilities. As of June 30, 2018, the Company had $ 52.3 million in cash collateral provided to surety companies associated with the bonding requirements of the BOEM and third party assignors. To address the supplemental bonding and other financial assurance concerns expressed to the Company by the BOEM in April 2015 and thereafter, the Predecessor submitted a long-term financial assurance plan (the “Long-Term Plan”) to the agency. Further, the Predecessor submitted a proposed plan amendment on June 28, 2016 that would revise the executed Long-Term Plan (the “Proposed Plan Amendment”). The Company continues to work with the BOEM under the Long-Term Plan and the Proposed Plan Amendment. Drilling Rig Commitments. As of June 30, 2018, we have approximately $ 8.4 million committed under three rig contracts for drillwells, rig recompletions and plugging and abandonment activities. The contracts’ terms range from March 17, 2018 through September 12, 2018. Other. The Company maintains restricted escrow funds as required by certain contractual arrangements. As of June 30, 2018, the Company’s restricted cash primarily related to $25.8 million in cash collateral associated with its bonding requirements, $6.1 million in a trust for future plugging, abandonment and other decommissioning costs related to the East Bay field that was sold to Whitney Oil & Gas, LLC and Trimont Energy (NOW), LLC on June 30, 2015 and $0.3 million in cash collateral for an office lease. Funds held in trust will be transferred to the buyers of the Company’s interests in that field. The Company and its oil and natural gas joint interest owners are subject to periodic audits of the joint interest accounts for leases in which the Company participates and/or operates. As a result of these joint interest audits, amounts payable or receivable by the Company for costs incurred or revenue distributed by the operator or by the Company on a lease may be adjusted, resulting in adjustments to its net costs or revenues and related cash flows. When they occur, these adjustments are recorded in the current period, which generally is one or more years after the related cost or revenue was incurred or recognized by the joint account. The Company does not believe any such adjustments will be material. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value of Financial Instruments | |
Fair Value | Note 14 — Fair Value of Financial Instruments Certain assets and liabilities are measured at fair value on a recurring basis in the consolidated balance sheets. Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of these techniques requires significant judgment and is primarily dependent upon the characteristics of the asset or liability, the principal (or most advantageous) market in which participants would transact for the asset or liability and the quality and availability of inputs. Inputs to valuation techniques are classified as either observable or unobservable within the following hierarchy: · Level 1 – quoted prices in active markets for identical assets or liabilities. · Level 2 – inputs other than quoted prices that are observable for an asset or liability. These include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). · Level 3 – unobservable inputs that reflect our own expectations about the assumptions that market participants would use in measuring the fair value of an asset or liability. For cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued liabilities and certain notes payable, the carrying amounts approximate fair value due to the short-term nature or maturity of the instruments. The carrying value of the Exit Facility approximates its fair value because the interest rate is variable and reflective of market rates, which are Level 2 inputs within the fair value hierarchy. The Company’s commodity derivative instruments historically consisted of financially settled crude oil and natural gas puts, swaps, put spreads, costless collars and three way collars. The Company estimated the fair values of these instruments based on published forward commodity price curves, market volatility and contract terms as of the date of the estimate. The discount rate used in the discounted cash flow projections is based on published London Interbank offered rates. The fair values of commodity derivative instruments in an asset position include a measure of counterparty nonperformance risk, and the fair values of commodity derivative instruments in a liability position include a measure of the Company’s nonperformance risk, each based on the current published issuer-weighted corporate default rates. See Note 6 – “Derivative Financial Instruments.” The fair value of the Company’s RSUs equals the market value of the underlying common stock on the date of grant . For its stock options, the Company utilizes the Black-Scholes-Merton model to determine fair value, which incorporates various assumptions as follows: · the expected volatility is based on comparable companies’ asset volatilities ; · the risk-free interest rate is the related United States Treasury yield curve for periods within the expected term of the option at the time of grant; and · the dividend yield on the Company’s common stock is zero. During the six months ended June 30, 2018 the Company did not have any transfers from or to any level within the fair value hierarchy. The following table presents the fair value of its Level 2 financial instruments ( in thousands ): Level 2 As of June 30, 2018 As of December 31, 2017 Assets: Oil and Natural Gas Derivatives $ - $ - Liabilities: Oil and Natural Gas Derivatives $ 43,098 $ 32,567 The following table sets forth the outstanding and estimated fair values of its long-term debt instruments which are classified as Level 2 financial instruments ( in thousands ): As of June 30, 2018 As of December 31, 2017 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Exit Facility $ 58,447 $ 58,447 $ 73,996 $ 73,996 $ 58,447 $ 58,447 $ 73,996 $ 73,996 |
Prepayments and Accrued Liabili
Prepayments and Accrued Liabilities | 6 Months Ended |
Jun. 30, 2018 | |
Prepayments and Accrued Liabilities | |
Prepayments and Accrued Liabilities | Note 15 — Prepayments and Accrued Liabilities Prepayments and other current assets and accrued liabilities consist of the following ( in thousands ): As of June 30, 2018 As of December 31, 2017 Prepaid expenses and other current assets Advances to joint interest partners $ 132 $ 1,381 Insurance 6,645 5,949 Inventory 885 394 Royalty deposit 756 1,021 Other 3,455 12,857 Total prepaid expenses and other current assets $ 11,873 $ 21,602 Accrued liabilities Advances from joint interest partners 253 81 Employee benefits and payroll 4,499 6,791 Interest payable 2,493 185 Accrued hedge payable 5,110 2,491 Undistributed oil and gas proceeds 19,421 20,079 Severance taxes payable 1,375 558 Other 18,960 15,309 Total accrued liabilities $ 52,111 $ 45,494 |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events | |
Subsequent Events | Note 16 — Subsequent Events On August 7, 2018, Anthony Franchi, a purported holder of Common Stock, filed a complaint against EGC and the Board in the U.S District Court for the District of Delaware. The case is captioned Anthony Franchi v Energy XXI Gulf Coast, Inc., et al., Case No. 1:18-cv-01203. The complaint alleges that (1) EGC and the Board violated Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, by allegedly failing to disclose material information in the Merger Proxy Statement, and (s) the Board, as alleged control persons of EGC, violated Section 20(a) of the Exchange Act in connection with the filing of the allegedly materially deficient Merger Proxy Statement. Mr. Franchi has asked the court to, among other things, (i) enjoin EGC, the Board, Cox and all other persons from proceeding with or consummating the Merger, (ii) alternatively, if the Merger is consummated, rescind the Merger or award rescissory damages, (iii) direct the Board to file a revised Merger Proxy Statement that does not contain any untrue statements of material fact or that states all material facts required in it or necessary to make the statements contained in Merger Proxy Statement not misleading, (iv) declare that EGC and the Board violated Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder, and/or Section 20(a) of the Exchange Act, and (v) award Mr. Franchi attorneys’ and experts’ fees. EGC believes that this complaint is without merit. EGC cannot predict the outcome of or estimate the possible loss or range of loss from this matter. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies and Recent Accounting Pronouncement (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Summary of Significant Accounting Policies and Recent Accounting Pronouncements | |
Principles of Consolidation and Reporting | Principles of Consolidation and Reporting. The accompanying consolidated financial statements on June 30, 2018 include the accounts of EGC and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the U.S. (“U.S. GAAP”). All intercompany accounts and transactions are eliminated in consolidation. EGC’s interests in oil and natural gas exploration and production ventures and partnerships are proportionately consolidated. The consolidated financial statements for the prior period include certain reclassifications to conform to the current presentation. Those reclassifications did not have any impact on the previously reported consolidated result of operations or cash flows. |
Use of Estimates | Use of Estimates. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates of proved reserves are key components of the Company’s depletion rate for its proved oil and natural gas properties and the full cost ceiling test limitation. Other items subject to estimates and assumptions include fair value estimates used in fresh start accounting; accounting for acquisitions and dispositions; carrying amounts of property, plant and equipment; asset retirement obligations; deferred income taxes; valuation of derivative financial instruments; among others. Accordingly, the Company’s accounting estimates require the exercise of judgment by management in preparing such estimates. While the Company believes that the estimates and assumptions used in preparation of our consolidated financial statements are appropriate, actual results could differ from those estimates, and any such differences may be material. |
Interim Financial Statements | Interim Financial Statements. The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10‑Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments of a normal and recurring nature considered necessary for a fair presentation have been included in the accompanying consolidated financial statements. The results of operations for the interim period are not necessarily indicative of the results that will be realized for the entire fiscal year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the 2017 Annual Report. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014‑09, Revenue from Contracts with Customers (“ASU 2014‑09”), as a new Accounting Standards Codification (ASC) Topic, ASC 606. ASU 2014‑09 is effective for the Company beginning in the first quarter of 2018. In May 2016, the FASB issued ASU 2016-11, which rescinds certain SEC guidance in the related ASC, including guidance related to the use of the “entitlements” method of revenue recognition used by the Company. The Company adopted ASC 606 effective January 1, 2018, which replaces previous revenue recognition requirements under FASB ASC Topic 605 – Revenue Recognition (“ASC 605”). The standard was adopted using the modified retrospective approach which requires the Company to recognize in retained earnings at the date of adoption the cumulative effect of the application of ASC 606 to all existing revenue contracts which were not substantially complete as of January 1, 2018. T he Company has elected the contract modification practical expedient which allows the Company to reflect the aggregate effect of all modifications prior to the date of adoption when applying ASC 606. Although the adoption of ASC 606 did not have an impact on the Company’s net loss or cash flows, it did result in the reclassification of certain fees received under pipeline gathering and transportation and pipeline tariff agreements that were previously included in oil sales to other revenue i n the consolidated statements of operations. The Company has determined that its contracts for the sale of crude oil, unprocessed natural gas and NGLs contain monthly performance obligations to deliver product at locations specified in the contract. Control is transferred at the delivery location, at which point the performance obligation has been satisfied and revenue is recognized. Fees included in the contract that are incurred prior to control transfer are classified as lease operating expense and fees incurred after control transfers are included as a reduction to the transaction price. The transaction price at which revenue is recognized consists entirely of variable consideration based on quoted market prices less various fees and the quantity of volumes delivered. The Company receives payment for product sales from one to three months after delivery. At the end of each month when the performance obligation is satisfied, the variable consideration can be reasonably estimated and amounts due from customers are accrued in accounts receivable, oil and natural gas sales in the consolidated balance sheets. Variances between the Company’s estimated revenue and actual payments are recorded in the month the payment is received, however, differences have been and are insignificant. The Company has elected to utilize the practical expedient in ASC 606 that states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under our contracts, each monthly delivery of product represents a separate performance obligation, therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required. The Company previously utilized the entitlements method to account for natural gas imbalances, which is no longer applicable under ASC 606. The impact to the financial statements resulting from this change in accounting for natural gas imbalances was not significant. In February 2016, the FASB issued ASU No. 2016‑02, Leases ( “ ASU 2016‑02”), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective, the FASB amended the FASB Accounting Standards Codification and created Topic 842, Leases . The guidance in this ASU supersedes Topic 840, Leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. In the normal course of business, the Company enters into lease agreements to support operations. The Company is evaluating the provisions of ASU 2016‑02 to determine the quantitative effects it will have on its consolidated financial statements and related disclosures. The Company believes the adoption and implementation of this ASU will have a material impact on its balance sheet resulting from an increase in both assets and liabilities relating to its leasing activities. In June 2016, the FASB issued ASU No. 2016‑13, Credit Losses, Measurement of Credit Losses on Financial Instruments (“ASU 2016‑13”). ASU 2016‑13 significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today’s incurred loss approach with an expected loss model for instruments measured at amortized cost. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. This ASU is effective for public entities for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. The Company has not yet determined the effect of this standard on its consolidated financial position, results of operations or cash flows. In August 2016, the FASB issued ASU No. 2016‑15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016‑15”). ASU 2016‑15 provides guidance on eight specific cash flow issues: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies; including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The Company’s adoption of ASU 2016‑15 on January 1, 2018 using the retrospective transition method had no effect on its consolidated financial position, results of operations or cash flows other than presentation. In November 2016, the FASB issued ASU No. 2016‑18 , Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016‑18). ASU 2016‑18 requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The Company’s adoption of ASU 2016‑18 on January 1, 2018 had no effect on its consolidated financial position, results of operations or cash flows other than presentation. |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property and Equipment | |
Schedule of property and equipment | Property and equipment consists of the following ( in thousands ): As of June 30, As of December 31, 2018 2017 Oil and natural gas properties - full cost method of accounting Proved properties $ 1,372,463 $ 1,307,009 Less: accumulated depreciation, depletion, amortization and impairment (791,585) (742,286) Proved properties, net 580,878 564,723 Unevaluated properties 192,275 200,199 Oil and natural gas properties, net 773,153 764,922 Other property and equipment 13,936 13,780 Less: accumulated depreciation and impairment (5,667) (3,660) Other property and equipment, net 8,269 10,120 Total property and equipment, net of accumulated depreciation, depletion, amortization and impairment $ 781,422 $ 775,042 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Long-Term Debt | |
Schedule of long-term debt | As of June 30, 2018 and December 31, 2017 the Company’s outstanding debt consisted of the following ( in thousands ): As of June 30, 2018 As of December 31, 2017 Exit Facility $ 58,447 $ 73,996 Capital lease obligations 17 21 Total debt 58,464 74,017 Less: debt issue costs 34 44 Less: current maturities 17 21 Total long-term debt $ 58,413 $ 73,952 |
Asset Retirement Obligations (T
Asset Retirement Obligations (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Asset Retirement Obligations | |
Schedule of changes in asset retirement obligations | The following table describes the changes to the Company’s asset retirement obligations ( in thousands ): Balance as of December 31, 2017 $ 664,851 Liabilities incurred 8,761 Liabilities settled (34,717) Revisions 20,238 Accretion expense 22,315 Total balance as of June 30, 2018 681,448 Less: current portion 55,952 Long-term portion as of June 30, 2018 $ 625,496 |
Derivative Financial Instrume26
Derivative Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Derivative Financial Instruments | |
Schedule of derivative positions | As of June 30, 2018, the Company had the following open crude oil derivative positions: Weighted Average Type of Volumes Contract Price Remaining Contract Term Contract Index (MBbls) Swaps July 2018 - December 2018 Swaps NYMEX-WTI $ 50.68 January 2019 - December 2019 Swaps ICE Brent $ 61.00 |
Schedule of fair value of our derivative instruments | The fair values of derivative instruments in the Company’s consolidated balance sheets were as follows ( in thousands ): Asset Derivative Instruments Liability Derivative Instruments As of June 30, 2018 As of December 31, 2017 As of June 30, 2018 As of December 31, 2017 Balance Fair Value Balance Fair Value Balance Fair Value Balance Fair Value Derivative financial instruments Current $ - Current $ - Current $ 36,793 Current $ 32,567 Non- - Non- - Non- 6,305 Non- - Total gross derivative financial instruments subject to enforceable master netting agreement - - 43,098 32,567 Derivative financial instruments Current - Current - Current - Current - Non- - Non- - Non- - Non- - Gross amounts offset in Balance Sheets - - - - Net amounts presented in Balance Sheets Current - Current - Current 36,793 Current 32,567 Non- - Non- - Non- 6,305 Non- - $ - $ - $ 43,098 $ 32,567 |
Schedule of the components of the gain (loss) on derivative instruments | The following table presents information about the components of the (loss) gain on derivative financial instruments ( in thousands ). Three Months Ended June 30, Six Months Ended June 30, (Loss) gain on derivative financial instruments 2018 2017 2018 2017 Cash settlements $ (15,301) $ 2,351 $ (28,348) $ 2,640 Non-cash gain in fair value (10,744) 7,061 (10,531) 10,470 Total (loss) gain on derivative financial instruments $ (26,045) $ 9,412 $ (38,879) $ 13,110 |
Supplemental Cash Flow Inform27
Supplemental Cash Flow Information (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Supplemental Cash Flow Information | |
Schedule of supplemental cash flow information | The following table presents supplemental cash flow information ( in thousands ): Six Months Ended June 30, 2018 2017 Cash paid for interest $ 4,626 $ 7,484 |
Schedule of non-cash investing and financing activities | Six Months Ended June 30, 2018 2017 Cash paid for interest $ 4,626 $ 7,484 The following table presents non-cash investing and financing activities ( in thousands ): Six Months Ended June 30, June 30, June 30, 2018 2017 Changes in capital expenditures and accrued liabilities or accounts payable $ - $ (164) Changes in asset retirement obligations 28,999 (133,039) Changes in other property and equipment - (455) |
Schedule of reconciliation of cash, cash equivalents and restricted cash | The following table presents the reconciliation of cash, cash equivalents and restricted cash as presented on the consolidated statement of cash flows (in thousands) : As of June 30, December 31, June 30, 2018 2017 2017 Cash and cash equivalents $ 97,900 $ 151,729 $ 178,855 Restricted cash, current 6,432 6,392 6,365 Restricted cash, long term 25,814 25,712 25,637 Total Cash, cash equivalents and restricted cash $ 130,146 $ 183,833 $ 210,857 |
Loss per Share (Tables)
Loss per Share (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Loss per Share | |
Schedule of basic and diluted earnings (loss) per share | The following table sets forth the calculation of basic and diluted loss per share (“EPS”) ( in thousands, except per share data ): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Net loss $ (34,035) $ (26,237) $ (67,090) $ (90,784) Weighted average shares outstanding for basic EPS 33,427 33,237 33,367 33,234 Add dilutive securities - - - - Weighted average shares outstanding for diluted EPS 33,427 33,237 33,367 33,234 Loss per share Basic and Diluted $ (1.02) $ (0.79) $ (2.01) $ (2.73) |
Schedule of components of common stock equivalents | Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 Warrants 11,393,213 1,447,992 12,508,419 1,238,023 Options 1,066,237 204,896 1,201,495 269,817 RSUs 33,584 79,509 310,788 23,584 PBRSUs 25,963 - 17,664 - 12,518,997 1,732,397 14,038,366 1,531,424 |
Fair Value of Financial Instr29
Fair Value of Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value of Financial Instruments | |
Schedule of the fair value of Level 1 and Level 2 financial instruments | The following table presents the fair value of its Level 2 financial instruments ( in thousands ): Level 2 As of June 30, 2018 As of December 31, 2017 Assets: Oil and Natural Gas Derivatives $ - $ - Liabilities: Oil and Natural Gas Derivatives $ 43,098 $ 32,567 |
Schedule of details of Level 2 financial instruments | The following table sets forth the outstanding and estimated fair values of its long-term debt instruments which are classified as Level 2 financial instruments ( in thousands ): As of June 30, 2018 As of December 31, 2017 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Exit Facility $ 58,447 $ 58,447 $ 73,996 $ 73,996 $ 58,447 $ 58,447 $ 73,996 $ 73,996 |
Prepayments and Accrued Liabi30
Prepayments and Accrued Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Prepayments and Accrued Liabilities | |
Schedule of prepayments and accrued liabilities | Prepayments and other current assets and accrued liabilities consist of the following ( in thousands ): As of June 30, 2018 As of December 31, 2017 Prepaid expenses and other current assets Advances to joint interest partners $ 132 $ 1,381 Insurance 6,645 5,949 Inventory 885 394 Royalty deposit 756 1,021 Other 3,455 12,857 Total prepaid expenses and other current assets $ 11,873 $ 21,602 Accrued liabilities Advances from joint interest partners 253 81 Employee benefits and payroll 4,499 6,791 Interest payable 2,493 185 Accrued hedge payable 5,110 2,491 Undistributed oil and gas proceeds 19,421 20,079 Severance taxes payable 1,375 558 Other 18,960 15,309 Total accrued liabilities $ 52,111 $ 45,494 |
Organization and Nature of Op31
Organization and Nature of Operations (Details) | 6 Months Ended |
Jun. 30, 2018itemft | |
Oil and natural gas properties | |
Number of oil fields owned and operated | item | 9 |
Maximum [Member] | |
Oil and natural gas properties | |
Off shore oil and gas properties, Depth of water (in feet) | ft | 1,000 |
Recent Events (Details)
Recent Events (Details) $ / shares in Units, $ in Millions | Jun. 18, 2018USD ($)$ / sharesshares | Jun. 30, 2018$ / shares | Dec. 31, 2017$ / shares | Dec. 30, 2016$ / shares |
Business Acquisition [Line Items] | ||||
Common stock, par value | $ 0.01 | $ 0.01 | $ 0.01 | |
Warrants exercise price | $ 43.66 | |||
Threshold affirmative vote, as a percentage | 33.33 | |||
Second lien note term terminated | 10 years | |||
Master services agreement term terminated | 10 years | |||
COX | Merger agreement | ||||
Business Acquisition [Line Items] | ||||
Common stock, par value | $ 0.01 | |||
Cash consideration per share | $ 9.10 | |||
Number of warrants issued (in shares) | shares | 2,119,889 | |||
Warrants exercise price | $ 43.66 | |||
Warrants cash exercise price payable by warrant holder | $ 9.10 | |||
Termination fee | $ | $ 8 | |||
Out-of-packet expenses maximum reimbursement | $ | $ 2 |
Summary of Significant Accoun33
Summary of Significant Accounting Policies and Recent Accounting Pronouncements - Revenue (Details) | 6 Months Ended |
Jun. 30, 2018 | |
Minimum [Member] | |
Revenue | |
Period over which entity receives payment for sales after delivery | 1 month |
Maximum [Member] | |
Revenue | |
Period over which entity receives payment for sales after delivery | 3 months |
Property and Equipment - Schedu
Property and Equipment - Schedule (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Oil and gas properties | ||
Proved properties | $ 1,372,463 | $ 1,307,009 |
Less: accumulated depreciation, depletion, amortization and impairment | (791,585) | (742,286) |
Proved properties, net | 580,878 | 564,723 |
Unevaluated properties | 192,275 | 200,199 |
Oil and gas properties, net | 773,153 | 764,922 |
Other property and equipment | 13,936 | 13,780 |
Less: accumulated depreciation | (5,667) | (3,660) |
Other property and equipment, net | 8,269 | 10,120 |
Total Property and Equipment, net of accumulated depreciation, depletion, amortization and impairment | $ 781,422 | $ 775,042 |
Property and Equipment - Impair
Property and Equipment - Impairment (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Impairment | |
Impairment of oil and natural gas properties | $ 40,774 |
Property and Equipment - Additi
Property and Equipment - Additional information (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2018 | Jun. 30, 2018 | |
Property and Equipment | ||
Reduction in unevaluated properties | $ 3.6 | $ 7.9 |
Amortization to evaluated properties | 2.2 | 4.3 |
Unevaluated properties costs transferred to evaluated properties | 1.8 | 4 |
Addition related to exploratory drilling costs | $ 0.4 | $ 0.4 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Long-Term Debt | ||
Total debt | $ 58,464 | $ 74,017 |
Less: debt issue costs | 34 | 44 |
Less: current maturities | 17 | 21 |
Total long-term debt | 58,413 | 73,952 |
Exit Facility [Member] | ||
Long-Term Debt | ||
Total debt | 58,447 | 73,996 |
Capital Lease Obligations | ||
Long-Term Debt | ||
Total debt | $ 17 | $ 21 |
Long-Term Debt - Exit Facility
Long-Term Debt - Exit Facility (Details) $ in Thousands | Mar. 29, 2018USD ($) | Dec. 30, 2016item | Jun. 30, 2018USD ($)item | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) |
Long-Term Debt | ||||||
Payments on long-term debt | $ 10,000 | $ 15,556 | $ 728 | |||
Debt | $ 58,464 | $ 58,464 | $ 74,017 | |||
Exit Facility [Member] | ||||||
Long-Term Debt | ||||||
Minimum percentage of total value of the entity's and subsidiary guarantors' proved reserves required to be covered by mortgages to secure debt | 90.00% | |||||
Number of facilities | item | 2 | |||||
Minimum Current ratio | 1 | 1 | ||||
Maximum Leverage ratio | 4 | 4 | ||||
Leverage ratio, Number of trailing quarters | item | 4 | |||||
Payments on long-term debt | $ 0 | |||||
Debt | 58,447 | $ 58,447 | $ 73,996 | |||
Letters of credit | $ 201,500 | 201,500 | ||||
Exit Term Loan Facility [Member] | ||||||
Long-Term Debt | ||||||
Asset coverage ratio threshold to make mandatory payment on exit term loan | 1.50 | |||||
Percentage of aggregate outstanding principal amount to be prepaid if asset coverage ratio is less than threshold | 7.50% | |||||
Payments on long-term debt | $ 5,500 | |||||
Amount available for borrowing | 12,500 | 12,500 | ||||
Maximum available for revolving loans | $ 25,000 | $ 25,000 | ||||
Exit Revolving Credit Facility [Member] | ||||||
Long-Term Debt | ||||||
Commitment fee (as a percent) | 0.50% | |||||
Letter of credit, rate of fees accrual (as a percent) | 4.50% | |||||
Letter of credit, rate of issuance fee per annum (as a percent) | 0.25% | |||||
Base Rate [Member] | Exit Term Loan Facility [Member] | ||||||
Long-Term Debt | ||||||
Percentage points added to reference rate (as a percent) | 3.50% | |||||
Base Rate [Member] | Exit Revolving Credit Facility [Member] | ||||||
Long-Term Debt | ||||||
Percentage points added to reference rate (as a percent) | 3.50% | |||||
London Interbank Offered Rate (LIBOR) [Member] | Exit Term Loan Facility [Member] | ||||||
Long-Term Debt | ||||||
Percentage points added to reference rate (as a percent) | 4.50% | |||||
London Interbank Offered Rate (LIBOR) [Member] | Exit Revolving Credit Facility [Member] | ||||||
Long-Term Debt | ||||||
Percentage points added to reference rate (as a percent) | 4.50% |
Asset Retirement Obligations (D
Asset Retirement Obligations (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Asset Retirement Obligations | ||
Beginning of period total | $ 664,851 | |
Liabilities incurred | 8,761 | |
Liabilities settled | (34,717) | |
Revisions | 20,238 | |
Accretion expense | 22,315 | |
End of period total | 681,448 | |
Less: current portion | 55,952 | $ 51,398 |
Long-term portion | $ 625,496 | $ 613,453 |
Derivative Financial Instrume40
Derivative Financial Instruments - Positions (Details) | 1 Months Ended | 6 Months Ended |
Apr. 30, 2018item$ / bbl | Jun. 30, 2018$ / bblbbl | |
Swap, Remaining contract term April 2018 to December 2018, NYMEX-WTI | ||
Net open crude oil derivative positions | ||
Volumes (MBbls) | bbl | 1,472 | |
Weighted average contract price, Swaps | 50.68 | |
Swap, Remaining contract term April 2018 to June 2018, ICE Brent | ||
Net open crude oil derivative positions | ||
Volumes (MBbls) | bbl | 1,095 | |
Weighted average contract price, Swaps | 61 | |
Swap, Remaining contract term April 2018 to June 2018, NYMEX-WTI | ||
Net open crude oil derivative positions | ||
Unwound (BPDs) | item | 3,000 | |
Swap, Contract term January 2019 to December 2019, Ice Brent | ||
Net open crude oil derivative positions | ||
Added (BPDs) | item | 3,000 | |
Weighted average contract price, Swaps | 61 | |
Swap, Remaining contract term April 2018 to June 2018, ICE Brent, Added April 2018 | ||
Net open crude oil derivative positions | ||
Added (BPDs) | item | 3,000 | |
Average floor price | 60 | |
Average ceiling price | 82 |
Derivative Financial Instrume41
Derivative Financial Instruments - Fair Values (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Liability Derivative Instruments | ||
Gross derivative financial instruments subject to enforceable master netting agreement | $ 43,098 | $ 32,567 |
Net amounts presented in Balance Sheets | 43,098 | 32,567 |
Current liabilities [Member] | ||
Liability Derivative Instruments | ||
Gross derivative financial instruments subject to enforceable master netting agreement | 36,793 | 32,567 |
Net amounts presented in Balance Sheets | 36,793 | $ 32,567 |
Noncurrent Liabilities [Member] | ||
Liability Derivative Instruments | ||
Gross derivative financial instruments subject to enforceable master netting agreement | 6,305 | |
Net amounts presented in Balance Sheets | $ 6,305 |
Derivative Financial Instrume42
Derivative Financial Instruments - (Loss) Gain (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Derivative Financial Instruments | ||||
Cash settlements | $ (15,301) | $ 2,351 | $ (28,348) | $ 2,640 |
Non-cash gain in fair value | (10,744) | 7,061 | (10,531) | 10,470 |
Total (loss) gain on derivative financial instruments | (26,045) | $ 9,412 | (38,879) | $ 13,110 |
Deposits for collateral with counterparties | $ 0 | $ 0 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | ||||
Cash paid for income taxes | $ 0 | $ 0 | ||
Effective income tax rate (benefit) (as a percent) | 0.00% | |||
Increase in valuation allowance | 5.9 | $ 12.3 | ||
Valuation allowance | $ 318.6 | 318.6 | $ 306.2 | |
Change in deferred tax assets related to Tax Cuts and Jobs Act of 2017 | 0 | |||
Change in valuation allowance related to Tax Cuts and Jobs Act of 2017 | $ 0 | |||
Forecast | ||||
Income Taxes | ||||
Cash paid for income taxes | $ 0 | |||
Effective income tax rate (benefit) (as a percent) | 0.00% |
Stockholders' Equity (Details)
Stockholders' Equity (Details) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2018 | Dec. 31, 2017 | Dec. 30, 2016 | |
Stockholders' Equity | ||||
Capital stock, shares authorized | 110,000,000 | |||
Common stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 | 100,000,000 |
Common stock, par value | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred stock, par value | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.01 |
Common stock issued upon vesting of restricted stock units (in shares) | 128,085 | 141,600 | ||
Common stock, shares outstanding | 33,396,563 | 33,396,563 | 33,254,963 | |
stock options (in shares) | 285,105 | 285,105 | ||
Warrants outstanding (in shares) | 2,119,889 | 2,119,889 | ||
Options | 2016 Long Term Incentive Plan | ||||
Stockholders' Equity | ||||
stock options (in shares) | 285,105 | 285,105 |
Supplemental Cash Flow Inform45
Supplemental Cash Flow Information - Supplemental (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | |
Supplemental Cash Flow Information | |||
Cash paid for interest | $ 4,626 | $ 7,484 | |
Cash paid for income taxes | $ 0 | $ 0 |
Supplemental Cash Flow Inform46
Supplemental Cash Flow Information - Non-cash Investing and Financing Activities (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Non-cash investing and financing activities | ||
Changes in capital expenditures and accrued liabilities or accounts payable | $ (164) | |
Changes in asset retirement obligations | $ 28,999 | (133,039) |
Changes in other property and equipment | $ (455) |
Supplemental Cash Flow Inform47
Supplemental Cash Flow Information - Reconciliation of cash, cash equivalents and restricted cash (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 | Jun. 30, 2017 | Dec. 31, 2016 |
Supplemental Cash Flow Information | ||||
Cash and cash equivalents | $ 97,900 | $ 151,729 | $ 178,855 | |
Restricted cash, current | 6,432 | 6,392 | 6,365 | |
Restricted cash, long term | 25,814 | 25,712 | 25,637 | |
Total Cash, cash equivalents and restricted cash | $ 130,146 | $ 183,833 | $ 210,857 | $ 223,288 |
Employee Benefit Plans - 2016 P
Employee Benefit Plans - 2016 Plan (Details) - 2016 Long Term Incentive Plan - shares | Apr. 29, 2017 | Dec. 30, 2016 |
Employee Benefit Plans | ||
Number of shares reserved | 1,859,552 | |
Percentage of equity reserved under plan | 5.00% | |
Percentage of total new equity that must be allocated | 3.00% | |
Maximum period in which percentage of total new equity must be allocated | 120 days | |
Percentage of total new equity allocated | 3.00% |
Employee Benefit Plans - 2018 P
Employee Benefit Plans - 2018 Plan (Details) - 2018 Long Term Incentive Plan - shares | Jun. 30, 2018 | Apr. 11, 2018 |
Employee Benefit Plans | ||
Number of shares of common stock available for awards | 1,860,000 | |
Number of shares remaining available for award | 1,317,083 |
Employee Benefit Plans - Stock
Employee Benefit Plans - Stock options (Details) - Options - 2016 Long Term Incentive Plan | 6 Months Ended |
Jun. 30, 2018 | |
Employee Benefit Plans | |
Share-based award, expiration period | 10 years |
Share-based award, vesting period | 3 years |
Employee Benefit Plans - Restri
Employee Benefit Plans - Restricted stock units (Details) - RSUs - 2016 Long Term Incentive Plan $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | Jun. 30, 2018USD ($)$ / sharesshares | |
Employee Benefit Plans | ||
Share-based award, vesting period | 3 years | |
Number of shares for which each unit provides right to receive | 1 | 1 |
Restricted Stock Units | ||
Granted (in shares) | 475,886 | 1,272,853 |
Outstanding at end of period (in shares) | 1,580,223 | 1,580,223 |
Weighted average share price (in dollars per share) | $ / shares | $ 6.92 | $ 6.42 |
Unrecognized compensation expense | $ | $ 10.6 | $ 10.6 |
Employee Benefit Plans - Stoc52
Employee Benefit Plans - Stock option valuation assumptions (Details) $ in Millions | Jun. 30, 2018USD ($)shares |
Employee Benefit Plans | |
Unvested stock options (in shares) | 285,105 |
Options | 2016 Long Term Incentive Plan | |
Employee Benefit Plans | |
Unvested stock options (in shares) | 285,105 |
Unrecognized compensation expense (in dollars) | $ | $ 0.9 |
Employee Benefit Plans - Perfor
Employee Benefit Plans - Performance-Based Restricted stock units (Details) - 2018 Long Term Incentive Plan - RSUs - USD ($) $ in Millions | Jun. 07, 2018 | Jun. 30, 2018 |
Restricted Stock Units | ||
Restricted stock units awarded (in shares) | 262,500 | |
Company's stock maximum award of target opportunity for performance level percent | 150.00% | |
Company's stock minimum award of target opportunity for performance level percent | 0.00% | |
Unvested performance based units | 262,500 | |
Unrecognized compensation expense | $ 2.3 |
Loss per Share - EPS (Details)
Loss per Share - EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Loss per Share | ||||
Net loss | $ (34,035) | $ (26,237) | $ (67,090) | $ (90,784) |
Weighted average shares outstanding for basic EPS | 33,427 | 33,237 | 33,367 | 33,234 |
Weighted average shares outstanding for diluted EPS | 33,427 | 33,237 | 33,367 | 33,234 |
Loss per share, Basic and Diluted (in dollars per share) | $ (1.02) | $ (0.79) | $ (2.01) | $ (2.73) |
Loss per Share - Other (Details
Loss per Share - Other (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Other disclosures | ||||
Net loss allocated to participating securities (in dollars) | $ 0 | $ 0 | $ 0 | $ 0 |
Loss per Share - Common stock e
Loss per Share - Common stock equivalents (Details) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities (in shares) | 12,518,997 | 1,732,397 | 14,038,366 | 1,531,424 |
Average Stock Price (in shares) | 6.85 | 25.94 | 6.33 | 27.56 |
Exercise price of warrant (in dollars per share) | $ 43.66 | $ 43.66 | ||
weighted average exercise price for EGC’s outstanding stock options | $ 28.90 | $ 28.90 | ||
Warrants | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities (in shares) | 11,393,213 | 1,447,992 | 12,508,419 | 1,238,023 |
Options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities (in shares) | 1,066,237 | 204,896 | 1,201,495 | 269,817 |
RSUs | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities (in shares) | 33,584 | 79,509 | 310,788 | 23,584 |
PBRSUs | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Anti-dilutive securities (in shares) | 25,963 | 17,664 |
Commitments and Contingencies -
Commitments and Contingencies - Letters of Credit and Performance Bonds (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Jun. 30, 2015 |
Letters of Credit and Performance Bonds | ||
Performance bonds outstanding | $ 328.9 | |
Cash collateral | 52.3 | $ 0.3 |
Exit Facility [Member] | ||
Letters of Credit and Performance Bonds | ||
Letters of credit | 201.5 | |
Exit Facility [Member] | ExxonMobil | ||
Letters of Credit and Performance Bonds | ||
Letters of credit | 200 | |
Performance Bond, Lease and area bonds | ||
Letters of Credit and Performance Bonds | ||
Performance bonds outstanding | 177.2 | |
Performance Bonds, Wells and facilities | ||
Letters of Credit and Performance Bonds | ||
Performance bonds outstanding | $ 151.7 |
Commitments and Contingencies58
Commitments and Contingencies - Drilling Rig Commitments (Details) - Drilling Rig Contracts $ in Millions | 6 Months Ended |
Jun. 30, 2018USD ($)contract | |
Drilling Rig Commitments | |
Drilling rig commitments | $ | $ 8.4 |
Number of contracts | contract | 3 |
Commitments and Contingencies59
Commitments and Contingencies - Other (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Jun. 30, 2015 |
Other | ||
Cash Collateral | $ 52.3 | $ 0.3 |
Bonding Requirements [Member] | ||
Other | ||
Restricted cash | 25.8 | |
Future Plugging, Abandonment and Other Decommissioning [Member] | ||
Other | ||
Restricted cash | $ 6.1 |
Fair Value of Financial Instr60
Fair Value of Financial Instruments - Dividend Yield (Details) | 6 Months Ended |
Jun. 30, 2018 | |
Black-Scholes option pricing model assumptions: | |
Dividend yield (as a percent) | 0.00% |
Fair Value of Financial Instr61
Fair Value of Financial Instruments - Assets and Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Liabilities: | ||
Oil and Natural Gas Derivatives, Liabilities | $ 43,098 | $ 32,567 |
Fair Value, Inputs, Level 2 [Member] | ||
Liabilities: | ||
Oil and Natural Gas Derivatives, Liabilities | $ 43,098 | $ 32,567 |
Fair Value of Financial Instr62
Fair Value of Financial Instruments - Long-term debt instruments (Details) - Fair Value, Inputs, Level 2 [Member] - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Carrying Value [Member] | ||
Long-Term Debt | ||
Long-term debt instruments | $ 58,447 | $ 73,996 |
Estimated of Fair Value [Member] | ||
Long-Term Debt | ||
Long-term debt instruments | 58,447 | 73,996 |
Exit Facility [Member] | Carrying Value [Member] | ||
Long-Term Debt | ||
Long-term debt instruments | 58,447 | 73,996 |
Exit Facility [Member] | Estimated of Fair Value [Member] | ||
Long-Term Debt | ||
Long-term debt instruments | $ 58,447 | $ 73,996 |
Prepayments and Accrued Liabi63
Prepayments and Accrued Liabilities (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Prepaid expenses and other current assets | ||
Advances to joint interest partners | $ 132 | $ 1,381 |
Insurance | 6,645 | 5,949 |
Inventory | 885 | 394 |
Royalty deposit | 756 | 1,021 |
Other | 3,455 | 12,857 |
Total prepaid expenses and other current assets | 11,873 | 21,602 |
Accrued liabilities | ||
Advances from joint interest partners | 253 | 81 |
Employee benefits and payroll | 4,499 | 6,791 |
Interest payable | 2,493 | 185 |
Accrued hedge payable | 5,110 | 2,491 |
Undistributed oil and gas proceeds | 19,421 | 20,079 |
Severance taxes payable | 1,375 | 558 |
Other | 18,960 | 15,309 |
Total accrued liabilities | $ 52,111 | $ 45,494 |